Trustees of K.B.H.M. Bhiwandiwalla Trust Vs. Commissioner of Wealth-tax, Bombay City Iii - Court Judgment

Desai, J.

1. This is a reference under section 27(1) of the Wealth-tax Act, 1957, made by the Income-tax Appellate Tribunal, Bombay Bench 'B'. The following two question have been referred to the High Court by the said reference :

'(1) Whether, on the facts and in the circumstances of the case, the Wealth-tax Act is applicable to the trustees functioning under annexure 'A' ?

(2) Whether on a proper construction of annexure 'A' the trust is exempt partially or wholly ?'

2. The assessees before us are the trustees of Khan Bahadur H. M. Bhiwandiwalla Trust.

3. Counsel on both sides are agreed that the answer to the first question is concluded by the decision of the Supreme Court in Trustees of Gordhandas Govindram Family Charity Trust v. Commissioner of Income-tax : [1973]88ITR47(SC) and that in accordance with the said decision the said question must be answered in the affirmative and in favour of the revenue.

4. In order to appreciate the point involved in the second question, a few facts may be stated : Khan Bahadur H. M. Bhiwandiwalla died in Bombay on 19th February, 1920, leaving a will dated 28th April, 1919, with a codicil thereto dated 11th February, 1920. The will is in Gujarati language. The said will was proved granted by the Bombay High Court on 11th December, 1920. The then executors and trustees under the said will executed a deed of trust of 26th July, 1926; the same was registered on 1st September, 1926, under the Indian Registration Act. A copy of the said trust deed has been annexed to the statement of the case as annexure 'A' and contains material portions of the will and the codicil. In annexure ' A ' reference was made to the trust declared in the will and the relevant portion of the will in which the trust referred to runs as follows :

'GH. - With the exception of one big substantial house situate on the other land known as that of Bomonji Kashinath as to the Chawls, houses, etc., which are on the remaining land, the same shall be pulled down and a sum of three to five lakhs shall be spent and thereon chawls (and) houses shall be got built in such manner that on the ground floor of all of them shops may be built. And the same shall be let out to poor and middle-class Zoroastrians for residence and occupation, fixing such rent which upon estimate will yield three and a half or up to four per cent. interest on the whole sum (invested) and the shops shall be let out to persons of very good caste for purposes of shop or any good kind of trade taking sufficient rent (therefor).

As to the sum which will be required for building houses on the said land, the same shall be taken in my name and out of my collective Punji and if I during my lifetime should have completed the same then well and good, if not then my trustees shall give the same for Dharam Khata (religious and charitable purpose) in my name and at my Uthiana (third day ceremony after my death) and that on this condition that the rent should be so fixed that the income of the rent should yield interest at three and half per cent, or up to four per cent, and all taxes, all outgoings, insurances, etc., being deducted out of the amount of the rent, as to the balance that may remain out of such moneys for pocket expenses every month and moneys for cloths annually as my trustees shall think fit shall be paid to the members of my family (and) to the members of my brother's families, and if Baj Rojgar (ceremonies) may have to be performed in connection with any members of my family the same shall be performed. In like manner at present I send allowances every month to several poor Zoroastrians of Kalyan and Bombay and on Papeti (holiday) I send them money for clothes. The same are to be continued to be paid to such of them as may be deeded proper and as the trustees may think fit and up to such period as may be considered proper and as to the balance that may remain out of the same (moneys) shall be paid to my servants and attendants belonging to any caste whatever who may be in poor circumstances and to others who may be thought proper in every affliction and trouble (of theirs) and moneys shall be subscribed to funds if after my lifetime the death should occur of any member of my family, my son Nanabhai excepted, and any members of my brothers' families on such occasion for the necessary death ceremonies in connection with those people Rs. 2,000 (in words - Two thousand) for each shall be paid to whomsoever may ask (for the same) and to whomsoever may need (the same) or under the supervision of the trustees the outlays in connection with the death ceremonies shall be made should any one die within up to five years (outlays) in connection with him alone (shall be made) not thereafter. In this manner Rs. 54,000 (Fifty-four thousand) shall be paid by my executors out of my collective Punji.'

5. The trust was assessed to wealth-tax for the assessment year 1957-58. Before the Wealth-tax Officer it was, inter alia, contended that the trust being a public charitable trust, the assets were exempt under the provisions of section 5(1)(i) of the Wealth-tax Act. The Wealth-tax Officer held that the considerations which applied to exemption under section 5(1)(i) of the Act were analogous to the considerations to the exemption allowed under section 4(3)(i) k of the Indian Income-tax Act, 1922, and determined the ratio of wealth liable to be taxed on that footing at 195 : 258.

6. There was an appeal against the assessment to the Appellate Assistant Commissioner before whom the trustees contended that they should have been given exemption on the whole of the trust property under section 5(1)(i) of the Wealth-tax Act, 1957. Other contentions were also urged. The other contentions succeeded and to that extent the appeal was partly successful. The Appellate Assistant Commissioner directed the Wealth-tax Officer to complete the assessment in accordance with the observations in the order of the Appellate Assistant Commissioner. Subsequent to that order the Wealth-tax Officer completed the assessment for the year under reference by his assessment order dated 9th May, 1962. There was further appeal against the said-assessment to the Appellate Assistant Commissioner. We are not concerned with the first of two contentions urged before him, since it is the agreed position that the matter is now concluded by the decision of the Supreme Court in Trustee of Gordhandas Govindram Family Charity Trust v. Commissioner of Income-tax : [1973]88ITR47(SC) previously referred to. The second contention which was urged before the Appellate Assistant Commissioner was that the quantum of net wealth determined by the Wealth-tax Officer was wrong, as the Wealth-tax Officer should have applied the exemption under section 5(1)(i) in the same ratio as income from the assets were exempted for income-tax purposes under section 4(3)(i) of the Indian Income-tax Act, 1922. On this point the Appellate Assistant Commissioner took the view that an exemption from levy of wealth-tax available only to properties held under trust or other legal obligation wholly for any public purpose of a charitable or a religious nature. According to the Appellate Assistant Commissioner, the properties held by the trustees were not held wholly for a charitable purpose. He, therefore, rejected contention advanced on behalf of the trustees.

7. The assessee, thereafter, filed an appeal before the Income-tax Appellate Tribunal, and as far as the above aspect of the matter is concerned, it was urged that the assessee was exempted under section 5(1)(i) wholly or, in any event, the assessee should have been given exemption with reference to the proportionate part which had been treated as exempt under section 4(3)(i) of the Income-tax Act. On a construction of the deed of trust (annexure 'A') the Tribunal held that one of the objection of the trust was to benefit the members of the family of the testator and his relations, and accordingly the trust could not be said to be wholly for a public purpose of a charitable nature. In the view of the Tribunal the claim for exemption under section 5(1)(i) succeeded wholly, or failed wholly, depending upon the trust being wholly for a public purpose of a charitable nature or not. According to the Tribunal, therefore, the claim for exemption failed wholly.

8. The learned counsel for the assessee has submitted three propositions for out consideration : (1) that on a proper construction of the relevant provisions in the deed of trust, the property must be regarded as one held under trust wholly for a public purpose of a charitable or religious nature in India; (2) that if in the opinion of the court it was not proper to accept the first proposition and hold that the trust property was held wholly for a public purpose of a charitable or religious nature in India, in any event it was primarily or predominantly held for such purpose and, therefore, the same was liable to be exempted under the provisions contained in section 5(1)(i) of the Wealth-tax Act; and (3) that, in any case, the assessee was entitled to be given exemption proportionately or pro tanto.

9. In order to appreciate these propositions reference will have to be made to the provisions of the trust deed and thereafter to the relevant section of the Wealth-tax Act as also to section 4(3)(i) of the Indian Income-tax Act, 1922.

10. The relevant provisions from the trust deed (annexure 'A') has been set out earlier. We were informed that this was based on official translation of the provisions in the original will which is in Gujarati. The translation cannot be said to be elegant or happy. Accordingly, I am of opinion that it is necessary to set out and consider the original Gujarati version, which is as under :

Paragraph in Gujarathi language omitted.

On a fair and proper construction it appears that the trustees are directed to realise the net rent income for the following five objects :

(1) for payment of monthly pocket expenses and annual clothing allowances to the members of the families of the settlor and his brothers;

(2) for Baj Rojgar (ceremonies) as may have to be performed in connection with the members of the settlor's family;

(3) for continuing allowances to several poor Zoroastrians of Kalyan and Bombay to whom the settlor was making allowances and payments, but to the extent and in the amounts as the trustees may consider proper ;

(4) for helping the settlor's servants and attendants and others of whatever caste to relieve them from affliction and trouble; and

(5) payment of certain amounts for the necessary death ceremonies, if within five years of the death of the settlor death should occur of any members of his family of his brothers' families, with certain exceptions and limitations which are not material for our purposes.

11. Mr. Kolah urged that clause (1) must be construed to take its colour form the subsequent clauses and that the pocket and clothing allowances mentioned thereunder should be regarded as payable only to the needy members of the settlor's and the settlor's brothers ' families. On a proper construction of the provision I am of opinion that this is not an acceptable approach. Even if we were to accept this, it would not be correct to hold that this object can be regarded as a public of a charitable nature.

12. There is not much dispute about the other four objects and it is the agreed position that they satisfy the necessary requirements.

13. The question to be considered is whether by reason of the fact that the first object cannot be regarded as a public object of a charitable nature, the assessees lose their right to claim exemption under the provisions of section 5(1)(i) of the Wealth-tax Act. That involves a proper construction of the said section.

14. Section 5(1)(i) of the Wealth-tax Act reads as follows :

'5. (1) Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee -

(i) any property held by him under trust or other legal obligation for any public purpose of a charitable or religious nature in India.'

15. On behalf of the revenue it was submitted that it was necessary that the trust should be wholly for a public purpose of a charitable nature, and that in the view we have taken of the first object the assessees' claim for exemption was liable to be rejected. It is necessary, in order to consider this aspect of the matter, to set out the provisions of section 4(3)(i) of the Indian Income-tax Act, 1922, which are in the following terms :

'4. (3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them :

(i) subject to the provisions of clause (c) of sub-section (1) of section 16, any income derived from property held under trust or other legal obligations wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto.' There is a provision, but it is unnecessary for our purposes.

16. It may be mentioned that I have given the contents of section 4(3)(i) as the section stood in 1956-57, i.e., at or about the-time when the Wealth-tax Act was considered and ultimately enacted by our Parliament. It cannot be denied that the two statutes are both taxation statutes, the Income-tax Act being concerned with the taxation of income and the Wealth-tax Act being concerned with the taxation of the source of that income viz., the wealth or the corpus of the estate. They are, therefore, in pari materia. The two provisions above set out, viz., section 5(1)(i) of the Wealth-tax Act and section 4(3)(i) of the Indian Income-tax Act, 1922, also concern exemptions in respect of property held under trust or legal obligation for religious or charitable purposes. However, one find that under the Indian Income-tax Act the first part of the section (we are not concerned with the latter part of the section) contains the word 'wholly' as qualifying the subsequent expression 'for religious or charitable purposes', whereas no such qualifying word is to be found in section 5(1)(i) of the Wealth-tax Act, 1957.

17. We were referred by the learned counsel for the assessee to paragraphs 607 and 608 in Halsbury's Laws of England, third edition, volume 36, where it is stated :

'It may be presumed, in the absence of context indicating a contrary intention, that in statutes in pari materia similar language is to be similarly interpreted, and that differences of language between an earlier and a later statute and intentional.'

18. It is made clear in a subsequent passage that a change of language is not conclusive that change of interpretation is intended, and may sometimes be simply due to slovenly draftsmanship.

19. It is quite clear that there is change in the language between these two enactments. The question to be decided is whether the change is deliberate and intentional or whether it is just a case, to use Halsbury's expression, of slovenly draftsmanship. If one turns again to section 4(3)(i) of the Indian Income-tax Act, 1922, under clause (i) to earn the exemption, income is required to have been derived from property under trust wholly or in part held for religious or charitable purposes. If it was wholly held on trust for religious or charitable purposes, the whole of the income is exempt, and in case of property held in part only for such purposes the income applied or finally set apart for application thereto is exempt. This is of course subject to other requirements mentioned in the sub-section and in the provision. Now, in the case of the Wealth-tax Act, where a property is held on trust for objects which are partly charitable and partly non-charitable, there cannot be any apportionment as is to be found under the Indian Income-tax Act. Such apportionment is possible only in case of income and is not possible with respect to be corpus or assets which yield income. In my view, the omission of the word 'wholly' in the above section of the Wealth-tax Act and the omission of a similar provision as is to be found in the-later part of the sub-section in the Indian Income-tax Act was deliberate and international and the legislature advisedly avoided or omitted the said word. The reason for this also is not far to seek. In the case of income, as stated earlier, arising from property held partly on trust for a public charitable purpose and partly for other objects, apportionment was possible and so section 4(3)(i) of the Indian Income-tax Act provided for exempting a portion of the income. As indicated earlier, this was not possible in respect of the corpus. The question then was for the legislature to consider whether in the case where the corpus is held on trust for various objects, some of which are of a public charitable nature and others not, is any exemption to be granted The view contended for by the learned counsel for the revenue is that unless all the objects of the trust are of a public charitable nature, the corpus would not qualify for exemption. The other view is that if it can be said that primarily or predominantly the objects of the trust are of a public charitable nature, the corpus would qualify for exemption under section 5(1)(i) of the Wealth-tax Act. In my view, the latter view is the better view. According to me, this was the intention of the legislature when in enacting the Wealth-tax Act, 1957, it omitted the use of the word 'wholly' as a qualifying word as regards the requirements concerning the objects of the trust when a similar word was to be found in section 4(3)(i) of the Indian Income-tax Act, 1922.

20. The above view finds support from a decision of this court concerned with the construction and appreciation of section 5(1)(i) of the Wealth-tax Act, viz., Trustees of Gordhandas Govindram Family Charitable Trust v. Commissioner of Income-tax : [1968]70ITR600(Bom) . In that case the court was considering an indenture of trust which was executed in 1941, which earlier, for purposes of income-tax, had already been considered by another Division Bench of the Bombay High Court. It was contended before the latter Bench that the earlier decision under the Indian Income-tax Act, 1922, was no longer good law in view of the subsequent decision of the Supreme Court in Trustees of the Charity Fund v. Commissioner of Income-tax : [1959]36ITR513(SC) . It was further submitted that the earlier view was in the context of the provisions of section 4(3)(i) of the Indian Income-tax Act, 1922, which are not the same as the provisions of section 5(1)(i) of the Wealth-tax Act, 1957, and consequently although the property held under trust may not be wholly for religious or charitable purposes as required under section 4(3)(i) of the Indian Income-tax Act, the trust may nevertheless be a trust for a public purpose of a charitable nature within the meaning of section 5(1)(i) of the Wealth-tax Act. We are not concerned with the first argument, which, it may be mentioned, was rejected. Considering the second argument, it was observed that 'the effect of all the terms of the deed was that the relief and help to the poor Vaishya Hindus or other Hindus was primarily and predominantly confined to the members of the settlor's family and the members of the Seksaria families of Nawalgadh and elsewhere.' According to the court, the object of the trust as a whole was predominantly to provide maintenance and marriage expenses to the members of the settlor's family, and remotely, if any, to the Vaishya Hindus or other Hindus. Accordingly, it was held that the trust deed in that case could not constitute a trust for any public purposes of a charitable nature within the meaning of section 5(1)(i) of the Wealth-tax Act.

21. Now, it may be mentioned that the assessee carried the matter to the Supreme Court and the decision of the Supreme Court is to be found reported in Trusted of Govindram Family Charity Trust v. Commissioner of Income-tax : [1973]88ITR47(SC) to which decision reference has already been made in connection with the first question in this reference. In the view of the Supreme Court also the trust in question was created primarily for the benefit of the members of the family of Gordhandas Govindram Seksaria. The Supreme Court agreed with the conclusion of the High Court agreed with the conclusion of the High Court earlier set out (page out 52 of the report). Now, in my opinion, these decisions bear out the view which I have indicated earlier as the better view, viz., that it is not necessary in considering the claim of an assessee to exemption under section 5(1)(i) of the Wealth-tax Act to require that all the objects of the trust should fall within the expression, ' public purpose of a charitable or religious nature in India'; it would be sufficient if, to use the approach of Kotval C.J. and V. S. Desai J. in the judgment in Trustees of Gordhandas Govindram Family Charity Trust v. Commissioner of Income-tax : [1968]70ITR600(Bom) , the objects of the trust considered as a whole could be regarded to be within the expression, viz., for a public purpose of a charitable nature.

22. We were referred to a number of authorities connected with the application of section 4(3)(i) of the Indian Income-tax Act, 1922, where the court was considering whether the property was held under trust wholly for religious or charitable purposes. It is unnecessary in my opinion to refer to any of them, since in my view it is unnecessary under the Wealth-tax Act that for the purpose of claiming exemption under section 5(1)(i) the property must be held under trust wholly for a public purpose of a charitable or religious nature in India; it is sufficient if the trust can be said to be primarily or predominantly for a public purpose of a charitable or religious nature in India.

23. A faint attempt was made by Mr. Joshi to submit that even in this view of the matter the object of the trust in question cannot be said to be primarily or predominantly for a public purpose of a charitable or religious nature in India. In this connection be sought to emphasize the words ' as to the balance that may remain out of the same (monies) ...' to be found in the clause earlier set out. In my opinion, that would not be a fair or a proper reading of the relevant provision. As set out earlier, broadly speaking, there are five objects indicated, four of which are such as may be described as objects of the nature specified in section 5(1)(i) of the Wealth-tax Act.

24. Here, one aspect may be emphasized, and that is that these objects are not disjunctive but conjunctive. The position might have been different if disjunctive word or words had been used to demarcate the different objects of the trust and the trustees had been given a discretion to utilise the whole income of the trust on any of the objects. If there was such a provision it would have been possible to urge that the trustees to the deed of trust could utilise the entire income for an object which was not an object of public charitable nature, and by reason of such provision the trust cannot be said to be one with an object primary and predominantly of a public charitable nature and would accordingly fail to qualify for exemption.

25. In my judgment the view taken by the Tribunal as to requirements of section 5(1)(i) of the Wealth-tax Act was not warranted by the wording thereof and cannot be upheld. The correct view is the one which I have indicated earlier, and in that view of the matter the trustees' claim to exemption will have to be upheld in its entirety.

Vimadalal, J.

26. I agree and have nothing to add.

27. BY THE COURT : Question No. 1 is answered in the affirmative and in favour of the revenue.

28. Question No. 2. - The trust property is wholly exempt under the provisions of section 5(1)(i) of the Wealth-tax Act, 1957.

29. The Commissioner will pay the costs of this reference to the assessee.